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Ontario Labour Relations Board confirms wholly-owned public utilities and municipalities are not related employers for the purposes of the Labour Relations Act, 1995

A recent decision by OLRB Vice-Chair David McKee confirms what municipalities have long believed: wholly-owned public utilities commissions and municipalities are not “one employer” for the purposes of the Labour Relations Act, 1995 simply because the municipality is the sole shareholder of the public utilities commission.

In LIUNA v The Corporation of the City of Sault Ste. Marie, released on March 13, 2015, Vice-Chair McKee determined an application by the Labourers’ International Union of North America, Local 1036 (“LIUNA”). LIUNA sought a declaration that the Corporation of the City of Sault Ste. Marie (the “City”), the Sault Ste. Marie Public Utilities Commission (the “Commission”) and a group of companies known as the “PUC Companies” were one employer for the purposes of the LRA.

In 1998, the Province of Ontario enacted the Electricity Act, 1998, which required cities to establish a business corporation to operate their electrical businesses or public utilities commissions. This transformed the way that public utilities were governed in many municipalities in Ontario. In this particular instance, the City created several corporations in accordance with the requirements of theElectricity Act, 1998, and the former employees of the Commission became employees of one of the various PUC Corporations. These employees continued to do the same work, in the same place, with the same equipment, and for the same customers.

In 2010, one of the PUC Companies asked for tenders on a building. Constructing the building was work in the ICI sector and LIUNA grieved the award of the contract to an employer not bound by a collective agreement. LIUNA asked the OLRB to find that the establishment of the PUC Companies and transfer of the employees thereto amounted to a sale of business and justified the application of s. 1(4) of the LRA.

The relationship between LIUNA and the City was of central importance to this case. In 1987, LIUNA negotiated a collective agreement with the City; however, the employees of the Commission had been represented by the Power Workers’ Union, and continued to be so after the introduction of the Electricity Act, 1998 and development of the PUC Companies. Following an application by the Power Workers’ Union, in 2001 the Board declared the PUC Corporations to be successor employers to the Commission within the meaning of s. 69 of the LRA.

LIUNA argued that the City ultimately controlled the PUC Corporations as shareholder and held a veto over large-scale borrowing for capital works, and therefore, the PUC Companies were identical to City departments in “structure, appearance and operation”. LIUNA therefore posited that the legal result should be that the PUC Corporations were bound to the same collective agreements as the City.

Fully rejecting this position, Vice-Chair McKee noted that the PUC Companies are in fact run quite differently from City departments, as they are separate operations that are not integrated with the City in any meaningful manner. It was particularly noted that the City has no role in the PUC Companies’ labour relations matters, and there is no office or department at the City to whom the PUC Companies report. Although the City has control of the PUC Companies insofar as it is a shareholder, Vice-Chair McKee noted that the OLRB has never found that the relationship of “parent and subsidiary corporation”, or ownership of the shares of a closely held corporation alone to be a basis for a related employer application.

Vice-Chair McKee found that the City and the Commission were separate legal entities prior to the enactment of the Electricity Act, 1998, and LIUNA had not acquired bargaining rights for construction labourers employed by the Commission, but only for those employed by the City. Furthermore, the development of the PUC Companies was required by separate legislation and could not be characterized as an attempt by the Commission to evade any existing bargaining rights held by LIUNA.

The Vice-Chair concluded that the PUC Companies performed the same end functions as the Commission, which had not been bound by LIUNA’s collective agreement. The Application was therefore dismissed.

This decision can be relied upon by Ontario’s municipalities as an indication of the OLRB’s understanding of the true nature of the relationship between municipalities and public utility commissions. While municipalities may be the sole shareholder of corporations, this will not necessarily result in a determination that the municipality and the public utility are related employers for the purposes of the LRA.